tv Discussion on Economic Policy in the George W. Bush Presidency CSPAN November 24, 2015 9:40pm-10:52pm EST
at urbana champagne. our second speaker is phillip swabg le, an adviser to even flow ma ro and contributes to firms. he is a professor at the international economic policy at the university of maryland's school of public policy. he was assistant secretary for economic policy at the treasury department from december 2006 until january 2009 serving as chief economist for secretary henry paulson. he was previously chief of staff at the white house crown krill of economic advisers from 2002 to 2005 and an economist at the imf that's the international monetary fund, and the board of governors at the federal reserve. at treasury, he was involved with a range of policies including t.a.r.p., housing, energy, environment, pensions
and macroanalysis. he's been specially involved lately in the policy efforts concerning housing, finance reform and broader financial regulatory reform. mr. swagel received a phd from economics from harvard university and a bash lor of arts from princeton university. our third speaker, hopefully will get here in time, mark summerland. even flow founded by mark summer labd. previously he swent ten yeerps as managing director of the lindsey group, a consulting firm. during this time, he traveled extensively to japan, china, arabia, germany, great britain, france, italy and switzerland. 2001 to 2002, he served as deputy assistant to the president for economic policy and deputy director of the national economic council n. that capacity he helped the president of the united states develop and implement his economic agenda.
he also worked as an economic policy adviser for george w. bush for president after he started his career at the u.s. senate budget committee. he holds a master of arts in applied economics from johns hopkins university and a master of public policy of duke university where he was a senator, jacob jaf its fellow and graduated georgetown university and currently serves as a board member of dow arabia, a hunt consolidated affiliate based in kuwait city and on the board of the virginia hospital center medical brigade. so, thank you and i will now -- now mr. swagel will start with his remarks. he also has mr. summerland's remarks if he doesn't get here in time and then present her remarks and then we'll have questioning. thank you.
>> great. thanks very much. so i'll start with mine and mark should be here in the next couple of minutes and if not i can -- i have his and i can talk about his role, as well. so i was at the end of the administration as the assistant secretary for economic policy at the treasury department. so essentially, chief economist for secretary hank paul son. i was confirmed by a voice vote of the senate just before the senate flipped in december of 2006 so just changed from -- then leader frist to leader reid and obviously since flipped back. back then, noncontroversial nominees got approved routinely so that's obviously different. i previously served as the council of economic advisers where we were colleagues and also that was when mark was a deputy at the nec. i was actually at cha twice. last six months of the clinton administration and the first six
months of the bush administration. working on trade policy. i was doing that on leave from the international monetary fund, went back to the fund and then came back at a political position as chief of staff. so mark's going to tell you later about the -- little bit about the campaign but i will just preemptively confirm something that i know he's going to say about the seriousness of the campaign policy planning and the way that affected the bush administration. so again, i was there at the first day of the administration as a non political appointee and so it was very typical early meetings early in the bush administration to hear discussions about how proposals, whatever was being considered, how did that line up with what was discussed during the campaign? so that campaign promises of then governor bush, president-elect bush were taken seriously which was fascinating and i suspect it's quite
different than some other administrations. and treasury i worked on a range of issues, financial crisis obviously dominated much of my time at treasury and worked on social security and immigration, on health care. a bit on energy and the environment. and i think all of these areas are ones in which the bush administration had serious policy proposals that would address the serious challenges facing our nation and deserve consideration on their merits. my sense is that especially after 2006, that is, starting with the new congress in 2007, they didn't exactly receive that serious consideration but that's just a fact and it's a fact of our polarized political system. so that's the way congress worked then and it's the way that congress worked over the last couple of years. so let mess talk a little bit about the financial crisis in the last couple of minutes here that i want to talk. which, obviously, is the center
of what i worked on while at the treasury department. an i'll try to use that to illustrate more broadly the way that economic policy making worked in the bush administration at least as i saw it. and so i was at treasury and throughout the administration, at the white house, housing and urban development and other parts of the executive branch, we were well aware of the building imbalances and of the problems in the housing sector and the economy more broadly. i have written on this topic at length. if you google swagel financial crisis you will see that. maybe it's my fault but anyway you will see what i've written. so policy making across the administration responded at the white house and hud especially efforts were made to come up with policies to lean against the credit availability in a responsible way. all right? so there were discussions on what is the role of the
government and what are the barriers to the spread of credit? right? why is it that credit-worthy people were getting credit, were getting mortgages before, maybe too easily, but now they can't and what was the role that government in addressing that? there were proposals from the fha, the federal housing agency and hud and other parts of the government to aggress this. in some sense, not assuming that markets are perfect and not assuming -- like i say, positively and saying there is a role for the government but i would say with a high bar for action to avoid the possibility of unintended consequences. and, you know, obviously compared to other administrations, you know, there was less government involvement but not by far, not the, you know, sort of caricature of none. of lie stay fair. the crisis manifested in august
of 2007. there were policy responses from the fed. from the administration the focus is how to help the market adjust. there's proposals of ill liquid assets and preventable foreclosures. the government -- the bush administration did not propose taking taxpayer money and saving people from foreclosures. but the focus was on saying, look, a foreclosure is costly. costs the bank money. costs the family involved. terrible for them and very costly personally and financially. and so there should be a way for the two parties to work things out and that just wasn't working very well and so the administration and the treasury secretary personally were very engaged in getting that process to work better. now, when's interesting in my mind is that these efforts were then later used as the basis for housing related efforts from the obama administration.
they put taxpayer money into it for lots of criticism. right? why am i paying taxes so pia can buy a third house and a couple big screen tvs? but so, you know, i think those policies were actually more effective than people think for the obama administration but they sure took a lot of criticism. there's actually a book about the crisis that makes this connection, that calls the obama
jpmorgan signaled no longer a no normal slowdown and the mode of work in the administration changed. all right? so the work out of the treasury department. it's important they speak about it but it was very well coore nated with the administration. the way the policy process worked is that generally the national economic council where mark was the deputy at the beginning of the administration would coordinate a policy process and bring in the other parts of the administration that were, you know, naturally involved in this. so that the financial crisis response was typical and unusual. typical in that the process worked and there continued to be the sort of nec process that mark was here, will talk about at the beginning. but by the end of the administration the process --
and sometimes the work was being heavily driven out of the treshcy department, which again was natural given the nature of the work. so the second phase was coming up with plans. again if you do the google search, you'll come up with some memos that were written about potential government plans to address the crisis. the third phase was from september on with the failure of fannie and freddie, lee man brothers, aig and more. and the way i think of it is that -- actually my boss haung paulson, he had a saying that i think is instruct tif. people would say it must be really tough to the this, to bail out this company or take this action to invest you know $350 billion of taxpayer money in banks -- $250 billion in tax free money no banks and his response was it's not a hard decision, it's just an
unpleasant one. he said, look, it's the right thing to do. i know it has to be done. i don't like doing it but it has to be done. and i think that was the approach. you know, i suspect that sort of approach would apply for president bush as well. that he had a set of core beliefs that i think mark will talk more about. but addressing a crisis, he's a very pragmatic man and a very pragmatic administration. i was look at the work done as following that script. to me what's fascinating is the new administration starting in january of 2009 really continued the work. the tarp continued with superficial changes. the people working on the tarp includ included, including the head of the top. so it was a great deal of
continuity in the financial crisis response between the two administrations. and obviously the president -- none of us were happy about getting to this point. but i think the administration's record can be comfortable or clear that the response was appropriate and ultimately effective. so one last thought, which was obviously the economic policy at the end of the administration was dominated by housing by the financial crisis response which of course meant there are things undone. president bush started on a climate change agenda gathering the g 20 nations for the first time. there's work on housing finance reform, social security reform, tax reform that sometimes got crowded out by the financial crisis. but that's the way it had to be. why don't i stop there. >> okay. great.
you want to go or you want me to go? >> no. you're next. >> thank you guys very much for having me. sorry to come in late. you can tell how long i've been away from working with president bush. being 15 minutes late would have been grounds for termination. i began working for governor bush in june of 1999 during the campaign and i worked until a year after 9/11. the time that i was in the white house the bush administration, president bush averaged 71% approval rating in the polls so my perspective is different. working at the beginning of the administration is often very different from working at the end. phil would tell you those were the good old years. but when you're running for your life on 9/11 they don't feel like the good old years. every single day in the white house is hard and you can see the constant grain that goes on
whether it's good times or bad times. i want to start off with the campaign. i feel strongly that the policy make in the bush campaign was much more serious than in most campaigns. president bush had an absolute rule that everything we proposed had to have the chance of becoming a law. there is nothing fantastical, no flat taxes or dynamic scoring or universal health care. they were all very pragmatic. that's not to say universally popular. but they were all things that with a little bit of effort could actually become low law. we produced two full policy books. these are things you have not seen in more recent campaigns. and we have a cbo scored budget and all of our proposals on taxes we had scored by the official scorers in congress. so at the point of the election in 2000, everyone knew how much
the bush plan would cost. they knew what the distributions were. you knew about problems like the a and p. you like the tax plan or not, it was an honest way of saying it and things were out there. so when we started governor bush, as when he was in texas, hads run on four things and he kind of had four accomplishments. one of the biggest ones was cutting taxes. that was something he believed in and was going to be a core part of the team. he assembled a team of ten prominent outside economists, two cea chairman, federal reserve governors, former top o and b officials and charged them with developing a tax plan that was both something that could eventually become law but also
something that would be bold enough to survive a steve forbes like challenge from the right during the campaign season. now it seems a little crazy here in 2015 to imagine people in 1999 being scared of steve fo e forbes, but he had came off of the 1996 campaign as being one of the thought leaders on the right. we started a process that went for six months. and within those ten groups of economists there were very different reasons that they wanted to be embedded within the tax plan. and the more philosophical conservatives started with the fundamental premise that the government was in surplus, that the surplus inherently belongs to the people who earn the money and therefore a part of it should be returned to them. that was the philosophical point. we also had -- people don't
often realize this. the focus was that the expansion was starting to get pretty long in the tooth and we are year eight or nine in an expansion and the idea that we were going the make it another four years without a recession seemed not to be consistent with history. and this was something that then governor bush was sympathetic to starting off in the oil patch in the '80s. any tex an is sensitive to that fact. then we had a group that were big supporters of reforming social security and they wanted to use most of the money-for-causes like that and therefore wanted a smaller tax plan. and so that was the tension that operated. in the end president bush decided on a plan that would phase in marng nal rate reductions even five years. we had discussions that if the economic weakened that would be available to speed up to provide
support. then we get past the election. we come into office and there's always a little bit of tension at the beginning of an administration and there's a particular one with the trushry secretary and some of the new members of the e con team who wanted to start clean and say okay, the campaign is over and now we have a new set of bigger group of people and let's start from scratch. governor bush had a very different mind-set which is that elections matter and that he was planning to govern on what he campaigned on and continue the theme of only develop things in a campaign that could become law. we stuck with the tax plan. i was part of a three-person negotiating team on the hill, negotiated over five months. and it became law in may of 2001. one of the lessons i learned during the negotiations is that -- and this applies to all presidents, past and present --
is members of congress are not going to take the political risks that the president himself is not going to take. i could talk about any economic argument or tax policy argument. but at the end of the day, what the member wanted to hear was, everything about the tax plan was out in public at the point of election and the president had survived and he had actually taken political risk on that point. after that point it was not that hard to get the votes. when the bill went before the senate it got 63 votes. people in history remember being very partisan. but that was a democrat controlled senate, including the chair of the finance committee supported the plan. and i think another lesson from history is that things have to have some amount of bipartisan or they will be relitigated time and time again. and that's been a problem with the affordable care act when there wasn't a single republican person who votes for it, then it's going to keep oncoming up
and up and up and up. the economy as we approach the 2000 election was clearly weakening. the first quarter of 2001, the economy contracted 1%, contracted another 1 frs in the third quarter of 2001 after the events of september 11th. it was apparent and in november we put the vice president on "meet the press" and had him say we're on the front edge of a recession. you can see these things before the economists declare them. the data moves decisively. and we then started to wrk on accelerating the tax cut. the only part that we could politically get accelerated was the low income part. in august of 2001 checks went out across the nation for 600 dollars per person. it's hard to tell if those worked at all. they went out three weeks before 9/11 and the data got 0 so bad
for a couple of months that it helped a little bit or not at all. the economy continue the to be sluggish through 2002 and into 2003 in part held back by the debate of going to war. the president made the decision to accelerate the marginal rate cuts and in may of 2003 the full tax plan hit for the first time. the third quarter of 2003 the economy accelerated by 6.9% in real terms. over the two years after the effect, it accelerated by 3.8%. these were the best couple of years of the presidency and fit with the historical lesson from president kennedy and president reagan, the tax cuts that are permanent in nature have more powerful effects than those that are temporary. they have a much bigger cost but you have to decide whether it's
worth it or not for their effect on the economy. i will probably -- i will go ahead and stop there and turn it over to pia. but i wanted to give you a little flavor of what the tox policy was like during the administration and we can talk more about how the national economic council works during questions or other things like that. >> thanks. so i was not a political appointee in the administration. i was a staff economist on the staff offed afed advisers and d me. i had three chairmen in my one year which might be a record, came in under greg, an amazing guy, professor at harvard. after that it was harvey rosen for a period of time and then at the end ben bernanke. i had amazing economic thinkers. i really had such a rewarding year surrounded by some of the
brightest economists that i've ever met really. the reason i think phil hired me was because in january of 2004, as marked describe, we were coming out of a recession in 2001 and then a jobless recovery for two years, a little over two years, and so immigration, which is my field, had been taken off the table. i don't know if you remember. when bush won the election and very soon in his first term he began talks with the president of mexico on immigration reform and an immigration plan with mexico. that was sort of -- we got the sense. although mark you know if this is true. an immigration agreement with mexico was imminent and that was the week before 9/11. of course after 9/11 immigration again wasn't mentioned for two and a half years were obvious
reasons. for those of us who worked on immigration were sad about 9/11 for many reasons, but of course that's another reason because that reform was squashed and an important opportunity was lost. but anyway, i came with high hopes that maybe this would be the year for immigration reform. and of course once the president's new term began, we started immigration talks in earnest within the white house and i thought we made a lot of progress. we worked mostly on what a temporary worker program would look like, which was going to be the hardest part of the immigration reform and is something that obviously congress had not really hammered out yet. we worked a lot on that. you know, it was nice to work in a field, on a topic where president bush really had very strong guiding principals for us, felt very strongly. he also understood it very well, being from a border state, you
know, having huge hispanic support in the election i think for a republican. he had done very well. so he was very close to this electorate, very close to the issue and provided great guidance. i felt very strong working on it. i felt like we knew what we needed to come up with. of course immigration reform never did work out. the mccain kennedy bill did pass the senate but didn't pass the house, of course. never was taken up, i believe. and the house, in 2007, would respond with border security act, lots of enforcement, more border enforcement and interior enforcement. from there on in the situation for immigration reform certainly deteriorated from my point of view anyway. and if you see president bush today, i think he'll openly say, you know, his big regret was after being elected, you know, in the beginning of his second
term focusing on privatization of social security instead of immigration reform. he'll tell you that and i think he really means it because it's an issue very close to his heart. that concludes my prepared remarks. i'm happy to take questions. >> we'll ask a number of questions and we welcome the audience asking questions. i guess the question to start with to all three is, what would be the long lasting effects of the bush administration economic policy? what has stood the test of time best? >> why don't you start. >> okay. sure. i can think of two things. so first is tox policy. and i delight in saying this. the bush-obama tax cuts are now permanent. it's -- i delight in saying that because there are so many people who, for a certain period, would sort of wake up in the morning before brushing their teeth would think about how terrible
the bush tax cuts were. and of course president obama for a year or two extended all of them, including the top rates, the state tax, everything. acknowledging the positive impacts on the economy, the negative ones from reversing them and then made permanent you know the vast majority of them, including the overall guiding structure. i think that's a permanent change or as far as a republic goes, a relatively permanent change. the importance of tax policy. number two, though -- that's the good, i say with a bit of a little smile. polarization. we can't replay the decade but i think of proposals on social security, health care and other things that -- some of those never got consideration. and sort of the debate was symbolic and political and not substantive. there's faults for everywhere
all around but i think that continues. and that's also i think a long lasting impact of the administration. >> i think from my time when i was there, i think that history doesn't give him enough credit for how shallow and brief the 2001 recession is. that that was a time that we had a massive collapse of the stock market bubble, there were trillions of wealth loss, that confidence was very low for a month or so after 9/11 and that that was the period where the economy could have really seized up. and it didn't for a number of reasons. and if you go back and look at the data, it was extremely, extremely small. and so i think the economic performance over the first, you know the first term was actually pretty good, given that we came in with massive stack market overevaluation and indebtedness that had to be adjusted.
oddly on economic policy, i'm a little more optimistic on immigration. i think we may look back 15 years from now and find that president bush was on the right side of immigration and that we're in a temporary working out period for the party and that hopefully it will go back to a more welcoming stance. you know, one of the things that i tell politicians to make it simple when they're thinking about immigration policy is there's really one measure of a country economically over time. and that is are people trying to get into it or out of it. if you tell me that the biggest problem that the united states faces is people are trying to get it into from all over the world, i'm going the worry about something else. from this debate, hopefully it will depend on who the republicans pick next year. people might look more kindly back on president bush for having been on the right side of that debate.
>> i think a key piece of the bush legacy will be bringing education policy into the federal government. i think that no child left behind, although i'm not sure what state it finds itself at the moment. it's within of those policies that maybe hasn't carried over into the obama administration. i think this idea that president bush had, even in texas, he was a an education reformer and took this to washington. he had very high -- i think it says a lot of him. we talked about this in a session earlier today. i think it suggests he was a president who believed that government could be very purposeful and that it had a purpose in education and a role in education. and i think the conversations i got to sit in on when i was at ca on education policy i found fascinating because just the high standards that they were
setting, chi thought were unrealistic. it was great. it was great. the foundations upon which no child left behind, although it's very controversial, i think the foundations are important and i think we'll never go back. >> you've touched on this. you've indicated that president bush had strong guiding principles on immigration. where else did he have strong guiding principles when it came to the economics of the country? >> i mean he definitely had a, you know, believed as a principle that taxpayer money first and foremost goes to the person who earned it. when you sit down to have a discussion about what to do in the budget within it's a higher standard to have to spend again. but he also believed, you know, very much that the end was not
economic growth. that economic growth was there to serve the people who needed it most. and that you had to have policies like education policy that would be kind of back filling along the way so if you had a strong economy you had everyone participating in it, or as widely as you could. >> let's see if there's some questions from the audience. if not, deen sochi and i have a whole list of questions. so we are ready. professor porati? >> i want to ask dr. rooenius. is the moment of immigration gone? was there just that first glimmer of hope in the bush
administration and is it in our future in. >> that's a tough one. is the moment gone. no. i mean it's a huge looming problem out there. right? it had to be addressed. i wonder though if it will now get addressed in the next administration because obviously at the current -- i mean if it could have -- we thought it was bad a year ago but it got a lot worse in november with the executive action of the obama administration in the sense that something that was extremely controversial already became even more controversial and now a whole other set of issues has been piled on to what is already a controversial topic. and so now it's about presidential overstep and so forth and what are the limits of executive action and everything. that's now thrown into the debate on everything else. i think that -- i mean i think the way to do it is out there.
i think we know thou do immigration reform. we've come a long way. after i left -- when i was in the white house nobody would have suggested that undocumented immigrants might get a temporary status and not a path way to citizenship. everyone was thinking along the lines of the 1986 immigration reform act. and we all thought these people should be made permanent and have access to citizenship. i think it was after i left, the blue card. that was for the first time that somebody raised the possibility to be able to bridge the divide in thinking on immigration reform we might offer these people temporary status. and so i think, you know, although that was unfortunate that you can't get, you know, your everything that you want, perhaps, but still that's a step
to, you know, bridging -- again, bridging the divide. we know how to do it. i would argue that we know how to do immigration reform and i think we know how to do it right now and it's just getting the politic to work. >> i have two thoughts on that that go well with what pia said. one from 2007 and then one from 2014. so 2007 i was at the trushry and i participated a little bit in some immigration discussions. and the discussion then, just the part i participated in was really about members of congress to the right of john mccain. sometimes what can we do just to, you know, make them feel better about supporting the proposal. a number of things are aimed at border security and people here illegally and things like that. you know, politically seems skewed in one direction. and of course one could look at
that and say, well, look, president bush at the time, this is before the surge was clearly working and really needed the support against critics in iraq, senator reed saying it's a lost war and things like that. so again, it was before president bush's surge policy worked in iraq. so it was 2007. 2014 what's fascinating to me, of course, president obama paused the, you know, his executive action to allowed the endangered democrat senators to have a chance. it didn't work out well. but paused it there and didn't wait for the new congress to have a chance. i understand it politically why, the pressure was on him and from the white house perspective he might have said speaker boehner can't control his caucus, there's no point in waiting. but it's fascinating to me he didn't give the speaker a chance to fail. that's really too bad.
but u agree with pia that it's going to happen. it's just we're in a little bit of a political induced time-out. i've named the person i think who is responsible for that time-out. we'll have to wait until it ends. >> professor bellis. >> the 2001 tax cuts have been the subject of much debate as far as what the long term effects are. certainly the short term effects were very strong for the majority of american families. the two issues that i was wondering if, i guess professor swagel you raised the tax cuts, so start with you. the wealth gap or question of growing inequality in the united states and the question of whether the tax cuts then meant less money for the government when it came to waging war in
arake. and so the tax cuts meant more money for american families, less money for some of the foreign policy needs and also more recently infrastructure questions. so i guess if you could speak to those questions, that would be great. >> yeah. i'll go ahead and start. so, one, you always start with the numbers. the bush 2001 tax cut cost $1.3 trillion over ten years. so it's a lot of money. it's also about the same as the obama stimulus plan cost in one year. and so it's not -- sometimes the rhetoric doesn't always match reality. also the biggest, you know, by far differences in what happened to the surplus were more based on changing economic performance. and if you throw in a recession or two, that just blows out your budget members much more than
anything else. you see huge declines and bonus income and capital gains. and so i don't -- you know, i don't think that the tax plan in any way restrained the spending on the cost of the war. that seemed to go on on its own trajectory. but yes, there is a choice between, you know, government finance infrastructure spending and tax cuts just like there's a choice between tax cuts and any type of government spending. that is a budget decision. i would just point out that we have, you know, actual data on what happened after the tax cuts happened that make it a decent argument for why they should have occurred. i forgot what the second -- >> infrastructure. >> one thing on the wealth gap that i think is really important is, you know, the growing wealth and equality and what point tax cuts flay in that. mathematically by far, the biggest contributor to the
wealth gap is federal reserve policy, which is designed intentionally to drive up asset prices. so if you want to objectively measure wealth and equality over the last five years, it is done mainly by the federal reserve. there is a very different standard for judging monetary policy for some reason than for tax policy when the exact same trickle down economic arguments you might want to make could be applied to monetary policy just as well. a lot of times all policy gets the economy going tends to have bad distributional effects. >> it made me think of a funny story. mark had left the white house by then. so in the fall of 2003, i can't remember exactly -- i could remember the exact day bay looking at the calendar.
the head of the cea did not -- there are two dining rooms at the white house mess. you know, a bigger one and a smaller one. the smaller one is for high ranking staff. the head of the cea didn't have the smaller one. have access to the smaller one. didn't make any sense. as chief of staff i just asked -- i didn't tell my boss. i just asked the head of administration hey, can we fix this. it was just tough getting a decision. i don't know why. it's one of those things it's not that big of a deal but it was tough getting a decision. and the day in the fall of 2003 that we had a massive positive gdp number, plus 7 something, showing the tax cut was working and the economy was back, the request was approved that day. so you know, the econ team is down. it's just the way it happens.
so that's about policy making. i would say on the second half of the second about the long term effects. i think it's a really good question. and in my mind the administration, in 2005, made a good effort at social security reform. it started just as i was leaving. and so, you know, there's a focus on private accounts and safeguarding people's assets. you can have a conversation about whether that makes sense and why. but it's the -- you can imagine doing it differently and focusing on this is about physical responsibility and the long run future and our children and things like that. i think that's a debate that we haven't yet had. in some ways we're going in the opposite direction with people saying, you know, let's -- i should say actually, there's wide agreement on increasing social security benefits for people who must depend on social
security for their retirement. so paul ryan's social security plan has a feature and senator elizabeth warren has proposed that as well. there's less agreement on entitlement benefits with high income. someone with a high lifetime income is probably not depending on social security for the foundation of their retirement. so you can imagine saying to that person, pay more in taxes or we're going to give you less in benefits. and of course, right, as any business student would tell you, those are the same over the lifetime, abstracting from mortality. what's fascinating to me is this polarized debate about things that are mathematically similar. and that kind of debate we haven't really engaged in for our society. and hopefully the next president will do that. >> yes, please. >> we heard a little bit about
trade spolcy yesterday. i would like your thoughts on trade policy under president bush. you could argue that the agreements he's signed he was the most pro. trade president we've had. what are the implications going forward in terms of trade policy, if you see any. >> i would start with -- that was one of his core principles as well. comes with being a border state, that he definitely believed in, you know, in trade policy fundamentally in his bones. for the time i was there the big piece on the agenda was getting trade promotion authority which had lapsed. that is a power need fd the president to go in and conduct trade deals. even in 2002 trying to get that bill through a republican house, we had to hold the vote open for four extra hours and twist arms to get it to pass by one single vote. and so trade stuff is always
very hard to get through the congress. and even -- and that was before kind of the rise of china and other things that maybe put more yand ward pressure on wages and other things here. and so he was certainly a -- that was something he felt in his bones. politics are always difficult on -- always difficult on trade. >> i agree. i worked a bit on the steel -- the beginnings of the steel protection. and i think it was pretty clear that even that action which was, you know, goes in the other direction, was meant to enable a wider trade agenda. it was a campaign promise first of all. and then to say i will be tough when tough is needed, a debate about whether it was needed and all that. tough in this case. and therefore you can trust me on the broader chad agenda.
i suspect president obama feels the same way, that trade is intrinsically good for the american people, for the economy and individual americans. not every american but for the united states as a whole. a chief economist has a really great paper describing the positive impacts of low retail prices, he looks at the welfare gains of walmart. and show that the low prices at walmart provide a huge benefit to individual american families, low income families especially. the politics are really tough on it. >> yes, please. >> i was wondering to what degree deficit reduction was an internal concern for the administration. and if there was ever a moment where it became a greater concern and people in the
administration started to wonder if this kind of national debt inconvenience was becoming more of a potential crisis of its own. >> i mean so my -- you know, my time we started with, you know, during the campaign, there was, you know, projections of large surpluses. that was not like a huge issue and i was much more of a focus on the long term demographic problems. and you could see back then 15 years out social security, medicare, medicaid spending was going to be problematic. and trying to think more about the long term. and then as soon as you go into recession, though, your policy is going to be focused on expanding anytime the short term, the deficit. and so that's not going to be an area of emphasis. i kind of went from one extreme in my tenure to the other extreme. and then it was, you know, i know after i left and the economy stabilized, it was a priority to get the deficit back
down to, you know, what a sustainable level is. and the sustainable level has to be something below 3% gdp. not exactly zero. but a lot is dependent on figuring out where the growth is going to be and where the next recession. and the that would knock you off target more than you ever realize. >> i remember in early 2008, after the physical stimulus of 2008 was passed, that was only $100 billion. at the time it seems like a huge amount of money. and the staff at the preshry, you know, not political staff. the career staff were excellent at selling it. th the treasury has continued to be staffed by experts and dawn wonderful job of funding the government. we haven't had the market
pressure that would make us. the long run problems are still there with entitlements. just one last thought, as an illustration of medicare part d which added the drug benefit and having pharmaceuticals as part of medicare made sense. the practice of medicine changed since the '60s. but the debate at the time was to have part d or not to have part d. they thought that part d wasn't generous enough. there's a donut hole. you ask why does somebody well to do get any benefit until they run through a couple thousand dollars prescriptions. that was the debate. in fact the affordable care act made the drug benefit more costly, it essentially made it so rich people got -- i'm sorry. it made other changes to make it more generous and more costly.
in some ways it went in the opposite direction in terms of that long run challenge. >> was the fed helpful or not helpful in terms of the bush economic policy? >> i would say not helpful because i'm of belief that starting in around 1995, 1997, we allowed, we being the country, a massive corporate credit boom in the late '90s and a massive rise in stock prices that then popped and then that was repeated in the 2004, '05, '06 period when the monetary policy was too easy and allowed the home prices to rise dramatically. they were inappropriate monetary policy was a fundamental source
of sort of the instability that we've had in asset prices and probably one of the biggest sources of the debate sort of post-financial crisis about whether or not it should be broader than just looking at a core level of inflation in goods and services. >> so fast forward -- >> i want to know what pia thinks. just kidding. sorry. she can't talk about it. >> let's fast forward. is the fed policy -- it's not the bush administration. obama administration. is the fed policy today helpful or not helpful in terms of looking ahead to the future. >> i think the fed policy should be right now be exiting its accommodated policy. the asset prices are again high. but the economy is approaching full place of employment. and that proper monetary policy
would coast the economy into full employment rather than run it below full employment for a period which always ends in recession. >> our economy is huge. and i'm just wondering internationally. was there ever any influence or suggestions from the state department in affecting economic policy given the fact that anything we do here could have adverse effects or beneficial effects around the world or the european union or china or wherever? >> i think you're always trying to get the best information you can on what's going on. and so if, you know, undersecretary of state for economics had good information on how china's economy is doing and whether there's a recession building or risks somewhere else in the world, that was always something that was, you know, always incorporated as, you
know, information about thinking about the future. you know, kind of went in as a data input just like the labor market or other things. i don't know that during, you know, my time it seemed pretty, you know, u.s. sen trick because we were in recession and had 9/11. that was the dominant events in the teen your that i was there, happened domestically. >> to some extent it depended on the people. al larson was one of the undersecretaries. he was in the same position under president clinton, a long term career -- i forget what they call it, foreign affairs officers. foreign service officer. that's it. he's superb. that's one example. i did a lot of work on trade policy. the state department was
incredibly influential and rightly so. secretary powell. and so for example, nerl the administration there was a trade dispute between the u.s. and canada over lumber, which has been an ongoing trade dispute. and the state department was very involved in finding a solution, along with the department of commerce under secretary in charge of that. commerce was excellent in finding a solution that worked for or industry and for them and satisfied the environmental concerns. that's an instance where the u.s.-canada relationship, those kinds of factors meant something for our policy. >> i thought so as well. and our meetings on immigration policy that the state department staff were just really often came with a completely different perspective from the rest of the white house staff and were really important in terms of bringing in a different view. again whether they were listened or not depended on who it was.
but i thought they were really important just because they're coming with a different perspective. >> what about the dynamic with the treasury department. because certainly i would imagine it could vary based on who the secretary of treasury is, their relationship to the president, and of course they have a significant impact on the economy also. so when you came to formalizing economic policy, how did that dynamic work between the white house, council of economic advisers and the department of -- treasury department? >> that's a great question. i think phil and i had very different experiences. and when i was there economic policy was anchored pretty firmly in the white house. and when phil was there, it was anchored much more in the treasury department. and again, a part of that is dependent on, you know, personalities and you know mr.
paulson was a very strong personality. i think at the -- you know, when i came in, at the beginning of any presidency, there's going to be a concentration in the white house because you've had a group that's been up and running for two years, that's been doing policy and there's going to be some continuation of that and that over time the other departments and agencies will, you know, will grow. you know, one of the rules about power that is, i think, you know, applies to almost everything in life is being physically close is really important. and so it is an advantage tore sitting in the west wing with the president versus even if you're treasury secretary, sitting in another building. because awe you know, it's easier for you to knock on the door next to you than to summon someone with all of the formal proceedings that happens. that is important. i think you can -- you know, if
you could see the president's schedule, you can almost always see power based on who has oval office tomb and who's in it. the nec's advantage -- this is a little inside that's really important. the nec is one of four super committees, along with homeland security and domestic policy council. that means that the chairman of the nec is the president of the united states. the chairman of the cea is the chairman of the ce action. that makes it the decision-making forum for policy decisions. and the super committees all get a regular amount of oval office time. and for the nec we would have normally three economic briefings a week, and that time was where your power came from. and we were, you know, attempting to run a process that was as fair as inclusive as
possible. important cabinet secretaries will often get their own separate time. the treasury secretary might have his separate time. but seeing who is in the meetings is really important. it's no secret that when i was there was a -- it wasn't the closest relationship between the head of the nec, my boss and the treasury secretary, paul o'neill. secretary o'neill was a, you know, coming from being a c ex-o of a company sometimes there's an adjustment period for all c objecti eos going into a cabinet position realizing they're no longer the top person. and sometimes there's a transition for academics who are used to throwing spears at each other in debates in a way that seems normal to them that doesn't seem normal to people who aren't academics. >> that's just wrong. >> it's just wrong with apologies to academics.
sometimes you take those two traits together and it can, you know, it cannot work. so for myself, as the deputy of the nec and treasury policy rain very closely, mainly at the deputy level. like peter fisher, who was under secretary domestic and exceptional and tim adams who is an undersecretary for international coordinated everything, worked closely. even when there's friction at the top, sometimes you can make it work with close ties. it's also the case that the -- i'm sorry. the nec has a very difficult personality role where you're supposed to simultaneously run an unbiased process but then you also are, by where you sit, an independent adviser to the president. and so i had to be able to separate, when i was in the oval office, to say, you know, mr.
president, you know, the treasury secretary is opposed to this policy and fairly say why he was opposed to it. or the labor secretary is for it and the commerce secretary is against it. but also be able to shift hats and if he asked me for my personal advice to give him my own personal advice. most people prefer just to give the personal advice or won't give a fair representation of people who aren't in the meeting. so you'll see the nec's power shifts sometimes when you have someone like, you know, larry who was there, it was his third time in the white house. you know, harvard professor, fed governor, all this stuff. we had a lot of capabilities in house to do things. and form or own opinions. and other times you'll have heads of nec that are more process running and then are better at running a fair process, that is what the emphasis on sen then the power
will be more rested in the agencies like the treasuries. it goes back to who happens to be in the job and that they're good at. >> did the krpt have a major role in economic policy? >> so the vice president is, you know, first of all sort of the public, you know, idea that he was running everything and the president wasn't is just completely at odds with everything that happened behind the scenes. and anyone who knows president bush personally, he kind of runs everything that he gets his hands on. and so you know, vice president chaney would sit in on almost, you know, every important meeting. he was the type that would ask one really good substantive question. he would be differential to the people running the meeting process. but vice presidents do have a separate channel. i mean they get to have lunch with the president on their own
and so sometimes their influence can come when other people aren't around. >> are there any other questions from the audience? kate. we have time for two more questions. so let's go. >> i guess i have a couple of questions if i can get away with it. one concern i have, mark, i feel like the bush personnel undersell the good that they did. you made the point that the tax cuts cost $1.3 trillion over ten years. i can accept that. but federal revenues rose on an annual basis tremendously, well over $3 trillion a year. that seems like arguably the tax cuts increased revenue. would you be willing to defend that this afternoon? the other question i would like to ask is it not fair to say that the bush administration did urge the congress repeatedly to
adopt regulations on the gses in terms of the mortgage crisis in is that a fair things for the public to understand? >> on the tax cuts, the $1.3 trillion that i use was the official budget score before they were passed. if you believe, like i do, that part of the 3.8% real growth rate after they were passed was due to the marginal rate reduction, then your cost estimate will be a lot lower. and so, you know, larry lindsey did a book on the reagan tax cuts and i.d. had a 41% recovery rate. and so, you know, the estimates for dynamic scoring will be somewhere between 10% and 40%, you know more academics clustered it at 10. but to me i look at the numbers and growth was higher. and so i use that as -- just if you -- that's the with no growth
assumption change anything. but what you could get. gses. when we were there in 2001 we were holding meetings on them. we, you know, wanted to raise their capital standards. and you could just see that the capital level was way too low. and you know, phil is the expert. he would know more what it was. i don't remember you know anything coming of it, you know, at that time. but you know, it was something even, you know, before we got into the housing boom that we were concerned that they were allowed to have this much lower level capitalization than any bank would ever have. >> right. the administration took a run at gse regulation twice after that, after '01. it must have been 2004. and you know, it didn't go anywhere. but the idea was, as mark said, to increase both the capital standards and to give the regular later more power.
there is an instance where the companies had much more power hand the regular later. and this again in 2006 and 2007 is one of the things that secretary paulson focused on early in his tenure. he had really good relationships with then senator leader reed, barney frank and others. and really pushed hard, bob steel the former deputy mayor of new york after his time in treasury. they worked a lot on this. it didn't happen until june of '08. right? so the law didn't get done until the crisis came which is an unfortunate part of policy making. but i think they tried really hard and in the right direction. >> i'd like to thank all of you for coming today. i'd like to thank dr. pia orrenius, mr. mark summerland and professor phillip swagel. one other point i would like to
make. a, i thought that they gave us tremendous insight into how many economic policy was developed in the bush administration. and the next conference in a few years will be on the obama administration. it will be interesting to see how economic policies was formed there. and it varies from administration to administration. but the other point, and i don't mean to embarrass or panelists here, but remember their names. i guarantee you they will be big parts in future administrations. because that's how it works. and they had very central roles in the white house, in the federal reserve, and so on, and i think you'll hear their names again and again. and i think they're tremendous assets to the country. and i really feel good that people of this caliber are at the point of decision-making and policy making. it makes me feel good and sleep well at night. so thank you all for coming. thank you.
[ applause ] wednesday night here on c-span3, gun rights activists discussing the 2016 election. here's a brief preview. >> let me start off by saying we all owe hillary clinton a very big thank you. why? her anti-gun rights rhetoric and record are going to ensure that the result is going to be a record turnout of gun owners in the 2016 elections. [ applause ] she's already decided to double down on barack obama's anti-gun
assault on our rights to get her party's nomination and energize gun owners to turn out to vote in record numbers are going to impact not just the presidential race but every race on the ballot from the u.s. senate all the way down to dogcatcher. it will impact every demeanor on the ballot. while not all democrats are anti-gun and not all republicans are progown rights, the party that controls congress or the state legislature controls the flew of legislation and it's important to our whole battle to struggle for the right to keep open bare arms. the importance of the presidential election of course cannot be limited at all. >> you can watch this entire discussion on guns and the 2016 election wednesday night on c-span3 at 8:00 p.m. eastern.
this thanksgiving weekend american history tv on c-span 3 has four days of featured programming. beginning thursday at 4:00 p.m. we'll take you national world war ii museum in new orleans as we rook back 70 years. starting with the invasion in north africa, through d-day, and the war in the pacific. they will share the experience of soldiers who fought on both fronts, including african-americans serving in a segregated military. our road to the white house rewind takes a look at the presidential campaigns of ronald reagan, bill clinton, george h.w. bush and michael dukakis. then thomas tutor on the history of arlington national cemetery, the role and creation of the tomb guard and stories about some of the notable people who are buried at the cemetery. and sunday at 4:00 on real
america, the special report by moral lee safer. american history tv, all weekend and on holidays too, only on c-span 3. now we're hearing about online sex trafficking and backpage.com. the ceo of back page.com was asked to testify, but he declined. witnesses who did appear before the senate committee on investigations included washington state's deputy attorney general and a lawyer with the national center for missing and exploited children. okay, thank you all f